Working hard to get ahead: Planning for the future isn't just about money

Is it possible to try too hard when it comes to planning for a financial future?

At 30 years old, Christos Gerasopoulos has been loading up on overtime hours and worrying about college costs for children he doesn't even have. Cable television? No, he runs marathons and reads history books for entertainment instead.

"My parents came to this country from Greece with nothing and were able to pay for me to go to Marquette University," the Milwaukee public safety officer wrote in a letter requesting a Money Makeover.

Honoring that legacy by succeeding financially, and eventually putting his own children through college without debt, has been the driving force in Gerasopoulos' adult life.

His efforts show the power of disciplined savings, which so many people lack.

He has far surpassed many of his contemporaries financially, said John Scherer, a financial planner with Trinity Financial Planning in Middleton, Wis.

With a net worth of $250,911, more than five times his yearly base pay, he's way ahead of the $14,200 median net worth for under-35 households found in the Federal Reserve's most recent survey of consumer finances.

Last year he saved more than $9,000 (more than 12 percent of his gross wages) just for retirement, a feat that Scherer said probably puts him in the top 3 percent to 5 percent of his age group.

"That should make you feel good. Not many people are doing that," Scherer said.

So what could possibly be wrong with this picture? Frankly, not a lot, Scherer said.

But even the best savers sometimes have blind spots or could use a second opinion on specific action plans. There are a few things Gerasopoulos could be doing differently to make sure he stays on track for a successful future, Scherer said.

Most important, he's a single guy supporting himself almost entirely on his paycheck from a high-risk job (he works for an explosives squad), but he has no disability insurance. That's a big issue, Scherer said.

"This is the single biggest problem with your financial situation," Scherer said. "You would have some Social Security disability protection, but that's often hard to qualify for unless you're permanently and totally disabled.

"The insurance isn't cheap, but if you can't work, that's trouble. Your ability to earn is your biggest asset."

Gerasopoulos agreed to check out prices for disability insurance that he can purchase through his workplace. He said he has been avoiding that expense because he has several months of sick time banked that he can draw on in an emergency.

Scherer said he believes Gerasopoulos needs formal disability insurance above that reserve because a catastrophic accident would wipe it out.

A second big area for consideration is whether he is working too much.

To earn his roughly $73,000 income, which includes about $49,000 in base pay, Gerasopoulos logs a lot of overtime hours. Recently he has worked 50 to 65 hours per week.

He has been wondering lately if he really needs to be doing that much.

In a word, Scherer said, no.

"You don't need to keep pushing so hard," Scherer said.

Because Gerasopoulos has kept living expenses to just about $40,000, even when his gross income has been high, the planner thinks he can ease up a bit and still continue to save.

He should aim to save 10 percent of his income for retirement, Scherer said. But he could well afford to bring home about $10,000 a year less in gross pay, live comfortably and still make that mark, Scherer said.

"The one thing I'm hearing from Christos is that the balance isn't there in his life, so perhaps working a bit less will lead to that balance, and maybe a family," Scherer said.

In addition to his own retirement savings, he will be eligible for a pension at retirement that will be worth at least $32,830 annually in today's dollars, not to mention Social Security benefits, Scherer said.

The only caveat is his age. A lot can happen between now and retirement, Scherer said, such as unexpected expenses, a health scare or starting a family. If Gerasopoulos burns out in his high-stress field, for example, he would have to start over somewhere else and refigure his retirement savings plan.

So while he probably can afford to cut down on his hours a bit, he needs to stay diligent when it comes to saving.

That shouldn't be a problem. When Scherer asked him to think about things he would change in his life if he had only a short time to live, Gerasopoulos couldn't come up with a luxury or a trip that he would want other than spending more time with family and friends.

Aside from all the overtime, Gerasopoulos also brings in money as a landlord.

Scherer examined Gerasopoulos' real estate holdings--a Milwaukee two-flat worth $214,000 where he lives and also rents out a three-bedroom unit for $675 per month. After running his analysis, Scherer said the property has been a good investment. So that's a keeper.

As for his more liquid investments, he has a good balance of low-risk accounts for his short-term goals (such as his next car) and domestic and foreign stocks for the long haul, Scherer said.

He could probably do better by choosing low-cost index funds available in his retirement accounts, though. The average annual expense charge for the funds he has selected is 1.49 percent, but Scherer said he believes he can get that down to well below 1 percent. And rather than continuing to plow new money into savings bonds and prepaying his mortgage, Scherer suggested parking extra cash in his retirement plan at work.

With that plan, a Section 457 deferred-compensation program, he gets tax-deferred savings and growth, with taxes due on withdrawal. Plus, he could potentially use that money to pay a child's college expenses. (Restrictions on borrowing can apply while you are still working for the employer providing the 457, but Gerasopoulos is eligible for full retirement at age 55, and when he leaves the force the money becomes available.)

To stay flexible, Scherer thinks he should maximize that account instead of starting a separate college savings plan for his future family, which is something Gerasopoulos had considered.

So what does Gerasopoulos think about all this?

"I always thought I was doing OK, but it's good to hear," he said. "And we found a couple of things that will make a difference for me down the road. It's reassuring."

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